The Australian securities market regulator Asic has shelved plans to introduce tougher rules on high frequency trading and dark pools following a dip in fleeting small orders by HFT traders and lower activity in dark markets.
The watchdog signalled its plans to clamp down on dark pool trading in March, but has now backed down in the face of market opposition and a decline in dark liquidity following new price improvement rules introduced in May.
With HFT activity also on the wane, Asic has dropped plans to rest small orders on the market for a set time and will no longer require dark orders to meet a minimum size.
Asic Commissioner Cathie Armour, says: "Asic's taskforces on high-frequency trading and dark liquidity, and earlier work over the past two years, has seen an improvement in the awareness of these areas of trading, hence the move not to proceed with some rules at this time."
The regulator has also relaxed earlier plans intended to improve crossing system transparency and disclosure by enforcing the publication of aggregate statistics on fees and order types. Instead system operators will now only be obliged to show this data to clients and not the wider market.
Asic says it will proceed with new enhanced record-keeping and reporting rules, but clarifies that this relates to a crossing system operator's procedures, and should be proportionate to the nature and size of the business, and not necessarily be real-time.
"The rules allow for flexibility to maintain a competitive market regulatory model, one that can move with the increasingly dynamic nature of our markets," says Armour. "Dark liquidity and high-frequency trading are now an integral part of our financial market landscape, and Asic has confidence that the regulatory settings will ensure an appropriate and measured outcome."